A merchant sells a product for $500, which is a 20% profit over the cost price.

A merchant sells a product for $500, which is a 20% profit over the cost price. What is the cost price?

A merchant sells a product for $500, which is a 20% profit over the cost price. What is the cost price?

Step 1: Understand that the selling price is $500.
Step 2: Know that the selling price includes a profit of 20% over the cost price.
Step 3: Let the cost price be represented as 'x'.
Step 4: Calculate the profit: 20% of x is 0.2x.
Step 5: Write the equation for the selling price: Selling Price = Cost Price + Profit, which is 500 = x + 0.2x.
Step 6: Combine the terms on the right side: 500 = 1.2x.
Step 7: To find x, divide both sides by 1.2: x = 500 / 1.2.
Step 8: Calculate the value: x = 416.67 (approximately).
Step 9: Therefore, the cost price is approximately $416.67.

Profit Calculation – Understanding how to calculate profit based on cost price and selling price.
Percentage Increase – Applying percentage increase to determine the selling price from the cost price.
Algebraic Manipulation – Using algebra to solve for the unknown variable (cost price) in an equation.